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Business

China to build Indonesia's first high-speed rail

Indonesia has agreed to let a Chinese railway company build the archipelago's first high-speed rail line. Southeast Asia's largest economy is looking to upgrade its decrepit infrastructure, a major impediment to growth.

State-owned companies from China and Indonesia signed the $5.5 billion (4.8 billion euros) deal on Friday, following a chaotic bidding process that angered Japanese officials who had also submitted a bid.

After much jostling between Beijing and Tokyo, the Indonesians ultimately awarded the contract to build a 150-kilometer (93-mile) railway between the capital Jakarta and the city of Bandung to China Railway International.

The chairman of the joint venture, Sahala Lumban Gaol, called the deal a "landmark in the development of high-speed railway links."

Indonesia's transport infrastructure is in dire need of repairs, but its government can only afford to pay for about 30 percent of the $450 billion experts say it needs to build roads, railways, ports and power plants by 2020.

Fast trains, easy money

The new Jakarta-Bandung line, however, will not require any new funding from the government - a decisive factor in Indonesia's decision to award the contract to China and not Japan, which would have required at least some government funding.

The state-owned China Development Bank will reportedly cover 75 percent of the funding for the project. The rest will come from China Railway and the consortium of four state companies that made up the Indonesian side of the group.

Tokyo's chagrin at losing the bid comes as the world's third-largest economy is locked in a competition with China to secure greater influence in Asia. The chief spokesman for the Japanese government called the final decision "extremely regrettable."

Construction is set to begin next year and finish in 2018. The first trains will run in early 2019, reaching speeds of 250 kilometers (155 miles) an hour.

cjc/uhe (AP, AFP, dpa)